People were hurriedly ordered out of the water after the attack around 11.30am today.
The 40-year-old victim was rushed to hospital in Elche where he was given stitches to a wound in his hand.
First aiders said he had come out of the sea at Arenales del Sol, just south of Alicante, with blood pouring from a large bite mark on his hand.
The man is thought to have a house locally but it is not clear if he is Spanish or an expat.
The attack has been blamed on a blue shark known in Spanish as a tintorera, a species of requiem shark which rarely bite humans.
It is only known to have been involved in 13 biting incidents, four of which ended fatally.
The red flag was kept in place for around two hours until 1.30pm when bathers were allowed back in the water.
In August last year British tourists were ordered off a beach in Benidorm when a suspected barracuda bit a 10-year-old on the hip.
And in December tourist Cristina Ojeda-Thies was bitten by a shark off the popular winter destination of Gran Canaria.
She tweeted afterwards as she showed off the wounds to her arm: 'Today I've had a face to face meeting with a shark. Things that happen when you swim in the Canaries in December.'
Pascual Calabuig, director of the council-run Wild Fauna Recovery Centre in Gran Canaria, described the incident at the time as 'very rare.'
Fernando Frias, President of the Canary Islands Shark Alliance which promotes shark conservation, called it a 'one-off'.
He added: 'I doubt something like this will happen again in the next 50 years so people shouldn't be afraid.'
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